Rising funding costs have not discouraged OFS Capital Management from marketing its first collateralized loan obligation in nearly a year.

OFSI BSL IX, a $409.8 million CLO, is being launched with an assumed coupon of three-month Libor plus 115 basis points on the senior, AAA-rated tranche, according to S&P Global Ratings.

The deal is expected to close in early July.

That spread reflects the recent CLO investor-friendly trend in which the average coupon-rate margin has widened by 10 basis points in the past three months.

Last week saw six of seven deals price AAA paper at 110 basis point spreads for established issuers such as CIFC Asset Management, MJX Asset Management, Sound Point Capital Management and Palmer Square Capital Management.

Three other deals priced at 110 basis points the week of June 5, as well.

Since mid-May, the average spreads on triple-A-rated CLO securities has moved out to 107 basis points above Libor, according to Deutsche Bank. That's 10 basis points wider on the quarter.

Analysts attribute the widening to heavy supply, primarily in the form of reset activity, in which managers print new batches of notes to replace securities in existing deals.

Spreads on AAA securities are moving out after hitting their narrowest levels in five years in March, at 98 basis points.

Some new activity may be spurred by managers making debut deals or returning to the market following the repeal this year of U.S. risk retention rules on CLOs, allowing manager to print deals without holding on to significant amounts of capital. But the 13 broadly syndicated loan CLOs in June has been from established managers such as PGIM, CBAM Partners, Bain Capital and Investcorp.

The OFS deal, placed by Norma and now among OFS’ $1.9 billion in CLO assets under management, includes a $252 million AAA tranche, benefiting from 38.5% subordination. The transaction features a two-year noncall period and a five-year reinvestment period.

The company last July issued the $406 million OFSI BSL VIII.

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